Emerging Assets Edge Higher on Signs of Easing US-China Tensions
Emerging markets rose, with the stock benchmark advancing to the highest level in more than four years, as signals of easing US-China trade tensions supported appetite for riskier assets.
The MSCI’s equity benchmark increased 1.4%, driven mainly by gains in shares of Taiwan Semiconductor Manufacturing Co., Tencent Holdings Ltd. and Alibaba Group Holding Ltd. The sister currency gauge edged 0.1% higher, with the Thai baht and South African rand outperforming.
After a fresh flare-up of trade tensions between Washington and Beijing last week, market sentiment improved after US President Donald Trump said that his threatened levy on Chinese goods was “not sustainable” though “it could stand.” While listing rare earths, fentanyl and soybeans as the top US priorities, Trump said he had a good relationship with the Chinese leader and expected a sitdown to happen in South Korea later this month.
“Markets appear priced for a positive or at least less-bad outcome” following Trump’s remarks although the trade developments remained unknown, Chris Weston, head of research at Pepperstone Group, said in a note.
The market’s base case seemed to be that China would concede its rare-earth export controls, which might allow an extension to the current tariff truce, Weston wrote. “However, one does question whether markets misprice the risk that China may not back down.”
